Running a business after bankruptcy: a practical restart plan

Discharge day doesn’t come with a certificate on the wall, but it should. Getting through bankruptcy takes resilience, and plenty of people come out of it with sharper instincts for running a business than they had going in. The question is how to rebuild in a way that lenders, suppliers and landlords will recognise.

This guide sets out an order that works.

What does bankruptcy leave on the record?

It’s worth knowing exactly what others can see. The Australian Financial Security Authority explains:

Record	How long	Who sees it
Bankruptcy period	Normally 3 years and 1 day from acceptance; a trustee can object to extend it, in some cases to 8 years	You, your trustee, creditors
Credit report	5 years from the date you became bankrupt, or 2 years from when it ended, whichever is later	Anyone who runs a credit check with your consent
National Personal Insolvency Index (NPII)	Permanent	Anyone who searches the public register

The practical takeaway: for at least a few years after discharge, and on the NPII forever, lenders can know. Building your plan around being open about it is far easier than hoping it won’t come up.

Step 1: Make sure you’re clear to run a company

ASIC explains that becoming bankrupt, or entering a personal insolvency agreement, automatically disqualifies a person from managing corporations. You can be a director, alternate director or secretary again after the bankruptcy is discharged, or once a personal insolvency agreement has been fully complied with. The company must then reappoint you and notify ASIC within 28 days.

Two practical points:

• Keep a copy of your discharge confirmation. Lenders, accountants and sometimes landlords will ask for the date.
• ASIC’s list of people who can’t be officeholders includes others besides bankrupts, such as people convicted of certain offences. If anything else applies to you, check before accepting an appointment.

Step 2: Set up the business cleanly

A clean structure makes everything after it easier:

1. Choose the structure with your accountant. Sole trader, company or trust, based on your plans, not on what you had before.
2. Open a dedicated business account. Every dollar of business income and cost goes through it. This account becomes your most important evidence for lenders.
3. Register for what you need: ABN, GST if required, PAYG withholding if you’ll employ.
4. Set up a separate tax account and move GST and withholding into it as you invoice.
5. Use accounting software from day one, even if you’re small.

Step 3: Build a clean record, deliberately

Lenders assessing an ex-bankrupt care most about conduct since discharge. That record builds from small things:

• Pay everything on time. The OAIC notes repayment history information stays on a credit report for two years, so a run of on-time payments becomes visible quickly.
• Lodge on time, every BAS and every return.
• Keep the business account tidy: no dishonours, few overdrawn days.
• Start with modest credit, such as supplier trade accounts or a small facility, and use it well.
• Avoid a burst of applications. Several credit enquiries in a short time can undo good work.
• Keep a simple file of evidence: your discharge confirmation, lodgement confirmations and a few months of clean statements. When the time comes to apply, you’ll have the whole story ready rather than scrambling for it.

Step 4: Know what finance is realistic, and when

Think of it as a ladder rather than a single leap:

Stage	What’s often realistic
Soon after discharge, with property	Property-secured business loans from specialist lenders, weighing security and plan heavily
Soon after discharge, no property	Very limited; focus on trading and building statements
After a period of clean trading	Unsecured, cash-flow or line-of-credit options sized on turnover and bank statements
Later, with a strong record	Larger facilities and, eventually, mainstream lenders again

Property-secured business loans run from $20,000 to $5,000,000. Unsecured and cash-flow options typically run from $5,000 to $500,000. If property belongs to a spouse, a family trust or a related company, it may help; our page on using a related party’s property explains how, and what it asks of the owner.

If you’d like to know where you sit on that ladder today, start a 60-second enquiry. There’s no credit check when you first enquire.

Step 5: Tell the story well

When you apply, lead with it. A short paragraph covers it:

• when the bankruptcy started and when you were discharged;
• the cause, in one or two sentences;
• what’s different now, with specifics;
• the evidence: discharge date, clean credit since, lodgements current, bank statements.

Lenders read these every week. A calm, factual summary reads as someone who has learned and moved on. Our page on business loans after bankruptcy describes how lenders weigh each part.

What mistakes should I avoid?

• Hiding it. The NPII is public and permanent. Discovery undermines trust faster than the bankruptcy itself.
• Growing too fast on expensive short-term debt. Stacked daily-repayment loans are a common trap for businesses that can’t get bank finance. If you’ve already fallen into it, see refinancing expensive debt.
• Mixing personal and business money. It makes your statements hard to read and your business hard to assess.
• Letting tax slide. An ATO balance on top of a past bankruptcy makes every lender more cautious.
• Guaranteeing other people’s debts without very careful thought. For many people, that’s how the bankruptcy started.

What if I had a debt agreement or PIA instead?

The same principles apply. Both are forms of personal insolvency recorded on the NPII, and lenders will ask about them. A completed debt agreement or a fully complied personal insolvency agreement is evidence you met your obligations, so say so, with dates. For a mixed credit file, see bad credit business loans.

What will suppliers and landlords ask?

Credit decisions aren’t only made by lenders. Suppliers offering trade terms and landlords considering a commercial lease often run credit checks too, and some search the NPII. Expect questions, and have the same short explanation ready. Offering a bank guarantee or bond, a larger deposit, or starting on shorter trade terms can bridge the gap until you have a track record. Every supplier account paid on time is also another line of positive history, which helps with the next landlord and the next lender.

Illustrative example: three years on

Illustrative only, not a real client. An electrician in Newcastle became bankrupt after personally guaranteeing a friend’s failed building company. After discharge, he registers a new company with his accountant’s help, is appointed director, opens a business account and a separate tax account, and runs every job through them.

Two years later, with clean statements, current BAS and no new listings, he applies for finance to buy a second van and take on an apprentice. The bank declines after a register search. A specialist lender reviews his discharge date, a one-paragraph explanation and two years of statements, and offers an unsecured facility sized on turnover. A larger facility follows a year later.

Starting again? Let’s find a lender who looks forward.

Coming back from bankruptcy is hard work, and you shouldn’t be locked out of finance forever because of it. A minute on the form, with no credit check when you first enquire. We don’t pass your details around, and the specialist who calls will focus on what you’ve built since discharge.

Please include your discharge date and any other credit history accurately. It lets us find a lender who’ll give your file a fair hearing, first time. See if you qualify →